AmEx beats profit estimates on higher spending, reserve release
- Today, my confidence in our growth potential over the medium and long term is strong. While we remain cautious about the pace of recovery.
- Total revenue, excluding interest expense, fell 18% to $9.35 billion, with spending on AmEx's cards for travel and entertainment declining 65% in the fourth quarter.
American Express Co posted a better-than-expected quarterly profit on Tuesday, as improved card spending and a reserve release helped it cushion a slump in demand for travel and entertainment during the COVID-19 pandemic.
The credit card issuer also signaled a more positive outlook, saying non-travel and entertainment spending exceeded pre-COVID levels for the second consecutive quarter.
"Today, my confidence in our growth potential over the medium and long term is strong. While we remain cautious about the pace of recovery, we are focused on achieving our aspiration of being back to the original EPS expectations we had for 2020 in 2022," said Chief Executive Officer Stephen Squeri.
Net income fell to $1.44 billion, or $1.76 per share, for the fourth quarter ended Dec. 31, from $1.69 billion, or $2.03 per share, a year earlier. Analysts had expected a profit of $1.31 per share, according to IBES data from Refinitiv.
The New York-based company said in October it did not expect business travel to pick up until late 2021 or early 2022 as global lockdowns and business restrictions had wrecked the travel and entertainment industry.
Total revenue, excluding interest expense, fell 18% to $9.35 billion, with spending on AmEx's cards for travel and entertainment declining 65% in the fourth quarter.
However, non-travel and entertainment spending, which includes online and offline retail spending, increased 4%.
Amex posted a gain of $111 million from consolidated provisions, compared with a loss of $1.02 billion a year ago, after the credit card issuer released reserves of $674 million, helped by an improving macroeconomic outlook, strong credit performance and lower net write-offs.
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